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Meltdown presentation atca full master Mike Hayward


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Mike Hayward: With the help of DK, I have redrafted my Meltdown presentation to be suitable for an International Audience and it is attached below. I have already given this talk at several UK universities with more to come. It is designed multidisciplinary audiences so it is not too technical and is richly illustrated. Please feel free to use and adapt the presentation to suit your own needs and viewpoint. My name is not mentioned in the presentation. The subject is too important to claim authorship or credit.

Summary...... The global debt mountain, peak oil, population growth, resource depletion, population growth, the pension time bomb and climate change are all interconnected.

Meltdown did not occur in October 2008, but we were within 4 hours of it happening. It has only been deferred. Remember, only 3 dozen economists correctly predicted the 2008 global financial crisis, out of a profession of 20,000 members. Not one of the World politicians and Central Bankers saw the crisis coming, but all of them claim to know the remedy. The reasons for the 2008 crash have not gone away. The US housing market is still in freefall and US and European Banks are becoming increasingly insolvent, although they won't admit it. Economic growth will be stifled by rising oil prices. The bailouts are not working. World Politicians, Bankers and Economists are trying to maintain the status quo but they are losing control. Fundamentally, the real systemic causes of the crisis are rarely discussed with transparency and have not been addressed. Fractional Reserve Banking and universal public ignorance of banking practices are the cause of all the our global problems.

The collapse will happen within the next couple of years. The Eurozone or USA will most probably be the epicentre. The interconnectivity of the financial system means we will all be affected. What happens next after the collapse is impossible to predict. History is replete with examples but not on a Global scale. Massive political unrest will prevail. There will be a rise in popularity of extreme left and right political parties.

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Meltdown presentation atca full master Mike Hayward

  1. 1. How close are we to the Systemic collapse of the Global Financial System?
  2. 2. <ul><ul><ul><li>Meltdown </li></ul></ul></ul><ul><ul><ul><li>How close are we to the Systemic collapse of the global financial system? </li></ul></ul></ul>
  3. 3. Oil is the fuel on which the Global Economy runs and credit is the grease
  4. 4. Exponential growth of World population and economy coincided with the Start of the use of fossil fuels and fractional reserve banking
  5. 5. The hydra with five heads <ul><li>Debt Mountain </li></ul>Peak oil Population growth Climate change Pension time bomb
  6. 6. The hydra with five heads <ul><li>Head I </li></ul><ul><li>Global Debt Mountain </li></ul>
  7. 7. The Debt Mountain Someday soon all this will be yours
  8. 8. Post War Economies <ul><li>Government debt high </li></ul><ul><li>Government benefits paid out comparatively small </li></ul><ul><li>Relatively simple financial system </li></ul><ul><li>Business Profits funded expansion </li></ul><ul><li>High personal Income, spending out of income, saving high </li></ul><ul><li>Personal debt extremely low </li></ul><ul><li>Then, over decades </li></ul><ul><li>Personal debt grew, saving fell </li></ul><ul><li>Computerisation of Banking system </li></ul><ul><li>Delusion that creation of debt = the creation of wealth </li></ul><ul><li>Public sector mushroomed </li></ul><ul><li>Less prudent banking practices evolved </li></ul>
  9. 9. US
  11. 12. Bottom Line….Who has caused the National debt mountains <ul><li>Promises made by politicians over the past century pledging unsustainable future benefits to be paid by later generations. </li></ul><ul><li>The willing cooperation of the Banking Sector to fund these promises, using Fractional Reserve Banking and electronic fiat currency, incentivised by short term bonus structure </li></ul>
  12. 13. What causes financial crises <ul><li>Some inter-related oft-quoted systemic causes…… </li></ul><ul><li>Easy credit, causing credit bubble </li></ul><ul><li>Low interest rates </li></ul><ul><li>Asset bubbles </li></ul><ul><li>Weak and fraudulent underwriting </li></ul><ul><li>Predatory lending </li></ul><ul><li>Deregulation </li></ul><ul><li>And………….. </li></ul>
  13. 14. What causes financial crises <ul><li>…… Increased individual debt burden </li></ul><ul><li>Financial innovation and complexity </li></ul><ul><li>Incorrect pricing of risk and poor risk models </li></ul><ul><li>Failure of economic models </li></ul><ul><li>Managers' capitalism </li></ul><ul><li>Failure of rating agencies </li></ul><ul><li>Creative accounting procedures, mark to market, extend and pretend </li></ul><ul><li>And…… </li></ul>
  14. 15. What causes financial crises <ul><li>Some human and non systemic causes </li></ul><ul><li>Greed, lust for power, lying, fraud, lack of accountability, the complete disregard for the rule of law and subsequent exposure </li></ul><ul><li>Change of public perceptions </li></ul><ul><li>Changes in social attitudes </li></ul><ul><li>Transparency… financial state of Bank becomes public knowledge </li></ul><ul><li>Insider whistle blowing and leaks </li></ul><ul><li>Loss of confidence </li></ul>
  15. 16. But fundamentally what is really causing this financial crisis <ul><li>The real systemic causes that are rarely discussed … </li></ul><ul><li>Fractional reserve banking system </li></ul><ul><li>The rising price of oil during economic growth </li></ul><ul><li>Financial innovation and complexity </li></ul><ul><li>Investors (e.g. pension funds) who want high yields to pay benefits to a burgeoning baby boomer population </li></ul><ul><li>Payment of interest on debt requires economic growth, which requires more energy </li></ul><ul><li>Future income insufficient to pay interest on debt and leave enough to pay retired baby boomers </li></ul><ul><li>Financial illiteracy of general public </li></ul><ul><li>Changes in social attitudes about debt </li></ul><ul><li>The interconnection of Global Financial risks </li></ul><ul><li>Powerful vested interests wanting to maintain the status quo </li></ul>Nothing has been done to address these issues
  16. 17. The importance of money <ul><li>Money is the foundation of the economy and society </li></ul>
  17. 18. <ul><li>'Money has no motherland; financiers are without patriotism and without decency; their sole object is gain‘ </li></ul><ul><li>Napoleon Bonaparte </li></ul>
  18. 19. Quotes about Bankers and Banks <ul><li>Henry Ford…… “It is well enough that the people of this nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.&quot; - </li></ul>
  19. 20. Who creates Money <ul><li>Coins and Bank notes are produced by the Central Banks </li></ul>These account for 3% of the total money supply . Where is the rest of the 97%?
  20. 21. 97% is electronic money that exists as entries in Bank Computer records
  21. 22. Fractional Reserve Banking <ul><li>In a speech on October 25 th , the Governor of the Bank of England, Mervyn King said “of all the many ways of organising banking, the worst is the one we have today. </li></ul><ul><li>“ To work, this financial alchemy requires the implicit support of the tax payer. ” </li></ul><ul><li>He said that possible remedies included not just breaking up banks, but also “eliminating fractional reserve banking” </li></ul>
  22. 23. Fractional Reserve Banking
  23. 24. Fractional Reserve Banking <ul><li>Whenever a bank gives out a loan in a fractional-reserve banking system, a new sum of digital money is created </li></ul><ul><li>Only a fraction (8% or less) of a bank's demand deposits (cash and other highly liquid assets) are kept as reserves available for withdrawal </li></ul><ul><li>Due to the prevalence of fractional reserve banking, the broad money supply of most countries is a multiple larger than the amount of base money created by the country's central bank. </li></ul>
  24. 25. Fractional Reserve Banking <ul><li>When a bank makes a loan, it increases the amount of money in the hands of the public, by increasing total amount of electronic bank deposits….. And vice versa, when a loan is repaid or written off, money is destroyed </li></ul><ul><li>Interest must be paid with more $ ’s, ie more debt </li></ul>Fiat Money is Debt
  25. 27. Fractional Reserve Banking <ul><li>Why does the Government support this “alchemy”? Because the Government needs far more money than that raised by taxes, so they borrow it </li></ul><ul><li>Consequences…… new $’s dilute value of old $’s in the economy, prices go up…….inflation </li></ul><ul><li>Who are the gainers?… the Government and the Bankers. Government can tax without people understanding they are being taxed. Bankers collect perpetual interest on nothing…. A river of unearned wealth </li></ul><ul><li>Who are the losers?… the citizens and future generations of taxpayers </li></ul>
  26. 29. Quotes about Bankers and Banks <ul><li>“ Give me the right to issue and control a Nation’s money and I care not who governs the Country” </li></ul><ul><li>Meyer Rothschild, International banker (1774 -1812) </li></ul>
  27. 30. Quotes about Bankers and Banks <ul><li>Sir Josiah Stamp, Director, Bank of England, 1940….. “Bankers own the earth; take it away from them but leave them with the power to create credit; and, with a flick of a pen, they will create enough money to buy it back again... If you want to be slaves of bankers and pay the cost of your own slavery, then let the bankers control money and control credit. Take this great power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this would be a better and happier world to live in. But if you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit.” </li></ul>
  28. 31. Financial innovation Asset backed securities <ul><li>Mortgage loans, home equity release loans, home equity lines of credit ( Before the crisis, Moody’s Rating agency, had given AAA ratings to 42,625 mortgage-backed securities, the same seal of approval U.S. Treasury bonds get. Of those rated in 2006, 83 percent have been downgraded) </li></ul><ul><li>Student loans ( In US, student loan debt has now surpassed all outstanding credit card debt ) </li></ul><ul><li>Credit cards debt </li></ul><ul><li>Car loans </li></ul><ul><li>Aircraft leases </li></ul><ul><li>Royalty payments </li></ul>
  29. 32. Derivatives are Weapons of Mass Destruction <ul><li>Trans-national play of derivatives is US$ 1.4 Quadrillion </li></ul><ul><li>Global size of the derivatives bubble is US$ 206k per person-on-planet. </li></ul>
  30. 33. The relative scale of the world's financial engine <ul><li>1. The entire GDP of the US is about USD 14 trillion and falling. </li></ul><ul><li>2. The entire US money supply is also about USD 14 trillion with rising Quantitative Easing in trillions. </li></ul><ul><li>3. The GDP of the entire world is USD 45 trillion and falling. USD 1,4 trillion is 31 times world GDP. </li></ul><ul><li>4. The real estate of the entire world is valued at about USD 65 trillion. </li></ul><ul><li>5. The world stock and bond markets are valued at about USD 70 trillion. </li></ul><ul><li>6. The trans-national universal model financial institutions own about USD 150 trillion in derivatives. </li></ul><ul><li>7. The population of the whole planet is 6.8 billion people. So the derivatives market represents about USD 206,000 per person on the planet. </li></ul>
  31. 34. <ul><li>Growth for the sake of growth is the ideology of the cancer cell. - Edward Abbey </li></ul>
  32. 35. The hydra with five heads Head 2 Population growth
  33. 37. In 1950, the World population was 2 billion
  34. 38. There are now 6.5 billion (6,500,000,000) people in the World, all becoming more and more addicted to oil
  35. 39. World Population <ul><li>Every second, 7 babies are born, 4 people die, 3 extra humans in the World </li></ul>Every day, there are 250,000 extra humans in the World That’s the population of New York every month 70 million every year
  36. 40. The hydra with five heads Head 3 Pension time bomb
  37. 41. Growing population of baby boomers, born between 1946 and 1964 Over 23% of Florida’s Population is over 60
  38. 43. <ul><li>Global Pensions 01 Dec 2010 </li></ul><ul><li>The pension plans of the world’s largest multinationals have fallen further into deficit despite record company contributions, new research shows. </li></ul><ul><li>The European Pensions Briefing 2010 report by consulting actuary LCP, found the aggregate accounting deficit stood at €160bn ($209bn) at the end of September 2010, up from €150bn at the end of last year. </li></ul>
  39. 44. Bottom Line <ul><li>Anyone who does not work will not survive unless they are supported by someone who does work. This has always been what happens. People who don’t work include </li></ul><ul><li>Retired, receiving occupational, private and state pensions </li></ul><ul><li>Children </li></ul><ul><li>Sick </li></ul><ul><li>Those at school and university </li></ul><ul><li>Unemployed </li></ul><ul><li>Very wealthy who have sufficient investment income </li></ul>
  40. 45. <ul><li>“ Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist. </li></ul><ul><li>Kenneth Boulding, economist  </li></ul>
  41. 46. The hydra with five heads Peak oil Climate change Heads 4 & 5
  42. 47. So what is ‘Peak Oil’? • Consumers are only interested in delivery flows • Many commentators talk of reserves and forget flows • Reserves are only useful as flows Peak oil is the point when worldwide production of conventional crude oil peaks
  43. 50. We’re Not “Running Out of Oil” <ul><li>Peak Oil means we’ve used up about half of of the recoverable oil and gas </li></ul><ul><ul><li>This sounds good; however, the half we’ve used was the easy stuff to get - - the cheap oil </li></ul></ul>
  44. 51. World population growth China's oil consumption is expected to grow by 7.5% per year for the next 20 years Climate change 4 fold
  45. 52. Is the Financial Crisis over?
  46. 53. Why will the 2 epicentres of collapse probably be USA or Eurozone US economy represents 25% of global economy European Union also represents 25%
  47. 54. Baltic dry index This index indicates that global shipping is now one sixth of what it was in 2008
  48. 63. Ongoing US Financial crises <ul><li>1. The mortgage debt crisis </li></ul><ul><li>2. The sovereign debt crisis </li></ul><ul><li>3. The bank failure crisis </li></ul><ul><li>4. The city and state debt crisis </li></ul><ul><li>5. Dependency on foreign oil imports </li></ul>
  49. 65. Much of Old World infrastructure predates the invention of the internal combustion engine. Communities were connected by walking and riding horses. Here is a typical English village as it is today Playing field
  50. 66. Most of New World infrastructure has been built after the invention of the internal combustion engine with cheap oil You can’t go anywhere in the States, or Canada, or Australia, or New Zealand without a car
  51. 67. The US Housing Market <ul><li>The world’s largest single asset class in value is in deep trouble </li></ul>
  52. 68. The price of crude oil
  53. 72. <ul><li>What is a Financial Crisis? </li></ul>
  54. 73. Levels of severity of financial crises <ul><li>Bursting of asset bubbles such as property, stock markets, commodity prices </li></ul><ul><li>Collapse of large financial institutions </li></ul><ul><li>Collapse of shadow banking system (investment banks and hedge funds) </li></ul><ul><li>Sovereign debt defaults </li></ul><ul><li>Currency crises </li></ul><ul><li>Credit crunch </li></ul><ul><li>Major Bank bankruptcy </li></ul><ul><li>Series of minor Bank runs </li></ul>All of the above, cause loss of paper wealth but real economy may continue. The next crisis is potentially catastrophic
  55. 74. <ul><li>Systemic collapse of Global financial system </li></ul>
  56. 75. Some things that may happen in a Financial Systemic collapse of a stable State to a failed State <ul><li>Internet outages </li></ul><ul><li>Schools and universities closed </li></ul><ul><li>Suspension of full banking activity for days </li></ul><ul><li>Nationalisation of banks </li></ul><ul><li>No or limited withdrawals from cash machines </li></ul><ul><li>Credit/debit cards won’t work </li></ul><ul><li>Petrol stations running out of fuel </li></ul><ul><li>Mass disorder, panic, riots </li></ul><ul><li>Martial law imposed, curfews </li></ul><ul><li>Rise in popularity of extreme political parties </li></ul><ul><li>Total collapse of old order followed by a command economy and loss of personal freedom </li></ul><ul><li>Near-total unravelling of the socio-political order. </li></ul><ul><li>Local Resource wars </li></ul><ul><li>Generational conflict </li></ul>
  57. 76. We have to learn to do 4 things fast <ul><li>Learn to live without fossil fuels </li></ul><ul><li>Adapt to the end of economic growth as we have known it </li></ul><ul><li>Support 7 billion human beings and stabilize the population at a sustainable level </li></ul><ul><li>Deal with our legacy of environmental destruction </li></ul>Is this going to happen?
  58. 77. How can we prevent another crisis in the future? <ul><li>Abolish fractional reserve banking </li></ul><ul><li>or something completely different…. </li></ul><ul><li>The State and corporate cartels have every incentive to maintain the status quo at all costs , so change will probably come from unconventional innovations </li></ul>
  59. 78. <ul><li>Unless the global banking system is radically changed, then the global crises we are all facing will never be overcome </li></ul>
  60. 79. The End